Research released yesterday revealed the cost to small business of meeting its GST compliance obligations is roughly 50% higher in Australia than in comparable overseas jurisdictions.
The research by Professor Chris Evans of the University of New South Wales and Dr Philip Lignier of the University of Tasmania is part of a three-year tax research project and indicates that the cost to Australian small businesses of GST compliance makes up 58% of their total internal compliance costs, as compared to approximately 40% for South African, British and Canadian small businesses.
Institute of Chartered Accountants Australia tax counsel Paul Stacey said the findings raise serious questions about the cost of compliance, and how businesses are affected by changing tax policy.
On average, it costs Australian small businesses a whopping $11,950 per year just to collect GST.
As the debate continues to rage about the GST threshold we need to make sure any future changes to tax policy, including the GST, do not have the effect of increasing this cost to business.
Increasingly, small business is becoming the unpaid tax collectors for the government, it’s not just GST there’s also payroll tax, income tax and fringe benefits tax as well as paying superannuation.
And all this tax collection comes at a time cost as well as a dollar cost.
Research by the same team released earlier this year found the average cost to a business of complying with its tax obligations is $28,000 a year, with businesses spending an average of 493 hours a year on tax activities, a huge increase from 1995 when they spent 313 hours a year on tax activities in 1995.
While the discussion continues about using GST to help state governments finance the provision of services to communities, focus also needs to be placed on the cost to businesses of collecting GST.
Whatever the level of GST, the way it is currently designed leaves small business in the role of unpaid tax collectors for government.
It’s a role small business receives no compensation for and a role that needs to be scaled back rather than expanded.